All Forum Posts by: Gino Hillincci

Ian, this is really helpful to me.  I am grateful.

Thank you.

 > Recapitalization.

Yes, but without calling it that.  If they just "sell it," it's functionally a recap, but they're not calling it what it is.

> Still some meat on the bone?

Yes, but why is there meat left on the bone?  Why not use other money in the fund to clean it up from within the current fund... even if it took a little longer to sell it and exit?

Thanks for your comments.  I apprecaite it.

Yeah, Chris. This is what I am pointing at.

If they sold to the market, we could be more sure.  If they bought from the market (for the 2nd fund), it would just be a cleaner deal.  But even if they get it appraised/audited... what does that mean? That they found 3 comps, so the price was "fair?"  Doesn't that mean the 2nd fund definitely didn't pickup any value at the sale?

And what if something is wrong with the original property? By selling it to the next fund, you could have more time to "average it out," and/or bury the problems for a few more years... while propping up the first fund and making it look more "successful" than it would have been if that property fetched a lower price on the market.

I'm interested to hear this is so common. This is good education. 

Thank you. 

Another question:

I was looking at BAM Capital, they were raising money last month. In a video, I heard the GP saying that "in this fund, we are purchasing some property from a previous fund" (paraphrase).  That was curious to me.

I took a call with BAM, and asked some questions about that... there is something about that practice I don't like.

My understanding is that BAM could use the capital from this current fund to improve those properties from the previous fund.  So the previous fund "created value," and can sell (back to BAM), exit, create upside for investors in the previous fund.  And the current fund could take new money, and further improve that same property, creating additional value in rents and on exit.  BAM said that by buying their own property (from themselves), they can be certain about the rents, market, etc.  Again, I am paraphrasing.

I won't invest in the current fund, because of this "selling to themselves" component.  If the first fund was doing what it should have done, there shouldn't be a lot of upside left in that property.

My concern is that BAM is "propping up" the first fund, buying the property at a level that makes that previous fund look successful (even if the current fund has to compensate for that price).  Why create this complication? Why not sell to a 3rd party, proving the value on the open market? This makes me cautious.  By selling to themselves, they could hide some flaw from the earlier fund, pass "low performance" to the current fund.  The current fund should be looking for deals that have a lot of investor upside, and if that is true, the previous fund didn't get it done, or if that's not true, and the current fund is essentially a recapitalization (without calling it that). Either the first fund underperformed (and is looking to clean that up), or the second fund is buying something with less upside than it could otherwise... that is my read.

Is this all normal/healthy? It doesn't feel right.

I don't know why they would do that? It would be so much cleaner not to buy their own buildings.

I am trying to get educated here. This is my read. I am curious what more experienced investors would say? And where you might send me to learn more as I look at places to invest.

Thank you.

I am interested in how to vet/evaluate syndication opportunities. For this question, I'm interested in Grant Cardone.  I have been studying him for the last month...

Someone I was talking to, pointed to this ^ video where this guy suggests that Grant has bought the property himself, and then turns around and sells it at a marked up value to Cardone Capital ("frontrunning" his investors). I'm not assuming the accusation is true, I'm curious to know how more experienced investors sort thru these kinds of situations?

There is a separate video where Grant seems to be talking about the accusation above, and Grant says it would be too hard, and would create too much tax consequence. Hmm. He also says that he would take an interview on the topic, that he'd address the accusations directly (which I believe he would, that seems within his character).

https://youtu.be/YPBbqmoXptA?t=714

It has been interesting to research him this last month or so. I was on a group call. I read his 10X book (which is not about real estate, but was interesting).  I'm not sure what I think of him, at this point.  I respect his work ethic (certainly), but he is a little wild (for sure). Would I give him my money...

I would take any advice about how to see this situation and/or how to choose good syndication opportunities. I'd like to learn more about this topic. I just happened to start with Grant. I am in a deal with another GP, and looking for an additional place to invest now.

Thank you.